Aldermen, Board of

A special meeting of the Board of Aldermen was held Wednesday, September 21, 2011, at 7:55 p.m. in the Aldermanic Chamber. President Brian S. McCarthy presided; Deputy City Clerk Patricia Piecuch recorded. Prayer was offered by Deputy City Clerk Patricia Piecuch; Alderman Cox led in the Pledge to the Flag. The roll call was taken with 11 members of the Board of Aldermen present; Aldermen Vitale, Tabacsko, and Wilshire were not in attendance. President McCarthy Alderman Wilshire has a work commitment this evening and was unable to join us. Alderman Tabacsko is attending a meeting of the Nashua Regional Planning Commission and Alderman Vitale had to leave us after the Finance Committee meeting to attend a funeral. Her Honor Mayor Donnalee Lozeau and Corporation Counsel James M. McNamee were also in attendance. COMMUNICATIONS MOTION BY ALDERMAN CLEMONS THAT ALL COMMUNICATIONS BE READ BY TITLE ONLY MOTION CARRIED From: Brian S. McCarthy, President, Board of Aldermen Re: Special Board of Aldermen Meeting MOTION BY ALDERMAN CLEMONS TO ACCEPT AND PLACE ON FILE MOTION CARRIED President McCarthy I’m going to ask the Mayor to introduce our discussion this evening. As I understand it, there are some things we can talk about in public session, but there will be a lengthy non-public session. When we get to that I will allow the Deputy City Clerk to have the rest of the night off. Mayor Lozeau Thank you Mr. President. As you all know, our case is before the PUC, which of course has to decide whether the merger is in the public interest. You recall last week in your package we provided you with a summary of the file testimony that the PUC will consider. In this public session I have asked Bill Ardinger and John Patenaude to review that testimony with you, that sheet, so that we make sure that we all know where things stand at this point and also so that the public has this additional opportunity to get all of the information in one place. I will note that all of the testimony and exhibits are on the City’s Pennichuck website and also on the State PUC website. Since this involves pending litigation, Bill and John will not give a detailed assessment of the positions or the City’s responses in the public session. But, we will ask for a non- public session later tonight to discuss those issues. Minutes will be taken during that non-public session, but I assume that you will seal them until the PUC hearing is finished. With that, I would like to invite Attorney Ardinger and Mr. Patenaude to come up and join us. If the CFO would like to join us as well. Thank you Mr. Chairman. Special Bd. of Aldermen – 09/21/11 Page 2 John Patenaude Just so you know who the players are on the sheets that we provided to you; the Petitioners who are the City and Pennichuck, the staff is the PUC staff, the OCA is the Office of Consumer Advocates, MVWD is the Merrimack Valley Water District, the Town of Merrimack was an intervener here, and also Mr. Teeboom from Nashua. I will just go over the main items here. As far as the overall merger deal, people were basically willing to approve the deal, but with their specific changes in mind. As we go down the sheet you see the eminent domain costs were discussed in the testimony, and here you will see reading across that the eminent domain costs, the Merrimack Water Valley District was for the reimbursement of the eminent domain costs, while the other parties were not. As far as rate making structure, this was a category, while you see a number of line items here, this is a category relative to how the rates are set by the company after the acquisition. The two biggest items here or issues are the consolidation of rates for the three separate utilities into one rate and also the OCA also testified that there should be one rate for the residents inside Nashua and a rate for people outside of Nashua. There is an issue relative to the rate stabilization fund, and what that is is it is really like a bond fund where monies are set aside in case of a bad year. In the context of Pennichuck, you have dry years and wet years. If you have a real wet year you might be short of revenues so that fund gives you the ability to draw down the fund to make sure that the City can pay down the debt and the debt service costs. If you go to the other side of the page, on the back side, the other issues relate to governance, the composition of the board, and how the board deals with items like capital expenditures, and then also accounting for the premium that the City is paying over the net book value of the assets today. We also have the purchase price, transaction costs, inventory of assets, sale of land, corporate structure and disclosure of revenues to municipalities. Some of these really relate to items which the PUC would not normally rule on especially as it relates to purchase price, inventory of assets, and sale of land, corporate structure. Those were the major items in the testimonies that were provided by the staff, OCA, and the interveners. Bill do you want to add anything? Bill Ardinger, Esq. Let me just take a deep breath and say it is good to see you guys again. I haven’t seen you for a while. I hope everyone is well. Summer has passed. The last time I was here we were talking about the deal, the merger agreement and the process that was going to happen, which was now the merger agreement was going to be presented to the PUC and we were going to ask the PUC to approve it because we believed we could prove that this proposal is in the public interest. That is the whole case. We believed we could prove it. We put in all of our testimony filed by a number of different witnesses; Mr. Gottlieb filed, the Mayor filed, John Patenaude filed testimony, John filed some testimony about some interest rates, and we put on our strongest case. We got asked a lot of questions by the other parties. We answered all of them. It is all public. All of this is public. Then after they had learned a little bit about what our case is about, they filed their testimony. This is the sheet that John has just gone through. I know you have done a lot of work on the Finance Committee before this. We don’t need to go into all of the details there are in this complex case. There are a lot of different issues that we are dealing with and managing, but the overall impression that we have received from the parties is that in general the deal seems to make sense. And they’ve got questions and concerns about eminent domain costs; what we proposed in terms of recovery there, about aspects of our rate making structure. Each party has got that. Special Bd. of Aldermen – 09/21/11 Page 3 What we move into now is we have asked these parties questions about their testimony. We are collecting information at a technical session we just had last week where we heard more about their positions. Where we go now is that we are in a process normally at the PUC where the parties start to explore whether they can come together on their differences and reach a settlement. There is a hearing scheduled on the merits of this case for October 25th through the 27th. We’re supposed to decide whether or not we can reach a settlement before that, on October 11th or 12th. Right now we are in that period where all of the parties have put their cards on the table and we’re going to talk to them about trying to bring a middle together that works for all parties and achieves the goals that the City has put forward in this deal. I think that our timing is if we are able to reach a settlement agreement, the PUC hearing gets really easy because all of the parties have agreed. You show it to the PUC. The PUC has full authority; they can disregard the settlement agreement, but that rarely happens. If for some reason we don’t reach settlement with one or more parties you have a litigated or contested hearing; you have to put on a bunch of witnesses, they get questioned, and that will take longer, significantly longer. At the end of the day, if we had a hearing on the 25th to the 27th and the PUC then takes its time to write its order, so it could take until, at the earliest 30 days, 35 days, we are into Thanksgiving, you get that order and that starts another 30-day period for motion for re-hearing, we’re really right up against the end of the year or even into the following year as a closing date. We are pushing right up against that, but we are going full steam ahead, and at this point I think if you have any specific questions…the bottom line I think is there is a very positive…this case was very heavily litigated from 2002. The parties got tense. Parties were fighting. This has been a different tone, a different culture, this case. The parties understand that this is a public purpose and the question is ultimately that public interest. A lot of that is about rates; how we are going to be able to prove that our projection of rates over time will be lower than what rates would be under the continued Pennichuck ownership if they were to continue. That is the case, and I think on whole the tone is good and we are hopeful that we can move into this process and reach a settlement agreement with all of the parties. Alderman Cookson Thank you. To your last point Attorney Ardinger, could you speak to what happens if we are not able to close by the end of this calendar year and are there opportunities for extension? What is that process if we are not able to close by the end of the year, what happens then? Bill Ardinger, Esq. Understood. Thank you. There is the merger agreement is where you start in answering that. The merger agreement says that if we get to December 31st of 2011, this year, and we don’t have a deal closed, that either party has the right to stop going forward. Both parties could agree to continue to go forward, but any party could stop at that point. If we get there that is a point where, but right now Alderman Cookson we are very much impressing on the other parties and the commission itself that it is important for us to drive to beat that timetable. Alderman Cookson Thank you. President McCarthy Are there any other questions? Special Bd. of Aldermen – 09/21/11 Page 4 Alderman Pressly Do you think the PUC is at all sensitive to that timetable? Bill Ardinger, Esq. Alderman Pressly yes I do. The point has been made in the Mayor’s testimony and also the Mayor attended a technical session where the point was made. All of the parties are particularly focused on this I think because, whether it changes tomorrow or not we don’t know, interest rates have generally moved favorably and parties start… under the proposal that the City has put forward, the benefits of lower borrowing end up in benefits in lower rates so I think yes all parties and the commission. Alderman Pressly Thank you. President McCarthy Are there any other questions? Is there anything else we want to discuss in public session? Bill Ardinger, Esq. I don’t have anything. Alderman Pressly Did I understand you correctly you are ready to close this meeting and go into non-public session, so if any of us have any questions we should ask them now? President McCarthy If you have questions that are appropriate for public session yes. Alderman Pressly I believe it is appropriate. Could we have a status at the Federal level; getting the legislation that we have been hoping to get? Mayor Lozeau Sure. Do you want to do that Attorney Ardinger or do you want me to do it? It is wholly dependent on the staff’s final recommendation and whether we can find a piece of legislation to attach our change to. That is what we are working on. We are hopeful that there will be tax legislation in the next I don’t know when they come back in and start looking at it. The new fiscal year on the federal level, as you know, starts October 1st. We would like to assume that there will be tax legislation soon after. If that is an appropriate vehicle for us to attach our request on we will be moving ahead with it. Alderman Pressly And just a further question with that; how many years forward…let’s say we can’t find one this term, how many years can we continue to do that and then refinance? Special Bd. of Aldermen – 09/21/11 Page 5 Mayor Lozeau If we purchase bonds with a callback we can do it for a period of time and then look at that. We will pay a little bit more of a premium for a callback bond, but it may be worth it. Alderman Pressly But you can keep trying indefinitely? Bill Ardinger, Esq. For the legislation? Alderman Pressly For the legislation. Bill Ardinger, Esq. Absolutely. Alderman Pressly Okay. It came up last evening; I for one have felt I have not been fully informed about the status of Southwood. During most of the discussions we were talking about the purchase and really the water company, the utility. I don’t expect you to have it today, but I did make a request last evening that if we could get some sort of information as to what Southwood has been doing with its land since this whole process started in 2002. They had at least 500 acres and I would like to know what has been sold, when has it been sold, and who has been buying it and developing it. As President McCarthy pointed out, the City of Nashua has purchased some of that land too so if you could include that that would be nice. It is just sort of an accounting…since they are a development company, what have they been developing over these last almost 10 years. Also, it is unclear to me…I am presuming that all of their records and everything that we purchase of them also comes under the Right to Know Law, and the companies besides the utility, once purchased, will be open for public scrutiny? Mayor Lozeau The corporation, Pennichuck Corporation, yes. Alderman Pressly And that includes Southwood? Mayor Lozeau Once we own it. Special Bd. of Aldermen – 09/21/11 Page 6 Alderman Pressly Would also like to clear up; it has been suggested that they have their own separate board of directors, and I don’t know if that is true or not, but I would like to know who those are. I’m asking if that could be provided to me at some time in the near future, or maybe others are interested. James M. McNamee, Esq. I can respond to a number of those questions. Based on your request last night I made some inquiries. I expect to have a full inventory of what property Southwood has sold since 2002, which was the date that you had asked for. My recollection is that they had 1,500 acres. I’m advised that they have 450 acres of undeveloped land left, 450 that is currently left. Of that, 38 acres is the Parcel F, and that is the remaining undeveloped property for sale that is in Nashua. Everything else is in Merrimack I guess. As to your question on the Southwood Corporation, who made the decisions, the Southwood Corporation board of directors is the same as the board of directors for Pennichuck Corporation. Alderman Pressly So they are the ones that negotiate the sale of the land. Maybe I asked for the wrong titles. James M. McNamee, Esq. They approve…you wanted to know who made the decisions… Alderman Pressly Who made the decisions… James M. McNamee, Esq. The board of directors of Pennichuck Corporation makes the decision… Alderman Pressly But certainly somebody else suggests to them what should be sold and price and… James M. McNamee, Esq. Because they also are the directors of Southwood. Are you asking which employees? I’m not sure that information would be readily available. I know that Roland Olivier is the President of Southwood Corporation. He is also the Corporate Counsel for Pennichuck, and his charge is to oversee the land development company. At least since he has been employed by Pennichuck and Southwood he has been in charge of that process. Alderman Pressly So after the sale is complete all of the documents of Pennichuck will be public records, not only the utility but the other three divisions? James M. McNamee, Esq. Yes… Special Bd. of Aldermen – 09/21/11 Page 7 Alderman Pressly Thank you. James M. McNamee, Esq. …and in fact now many of their documents are publicly available on the SCC website. Alderman Pressly Thank you. President McCarthy With regard to Southwood, are you asking who decides which properties they hold onto and which ones they sell? Alderman Pressly That is basically what I would like to know. I can’t imagine the board of directors does that. President McCarthy The answer to that is all of it. The lands that they transferred to the ownership of Southwood were the ones that the company decided to sell so anything that was in Southwood’s inventory was intended to be sold. Alderman Pressly Was available for purchase. President McCarthy Yes. Alderman Pressly I don’t know if they market it or don’t know if developers approach them. I presume we will learn all of that. President McCarthy I think there is some of both. They certainly had a partnership with David Winstanley on the marketing of a number of the properties out on what is known as Parcel M, which was northwest park behind Chili’s and Greystone Plaza. Alderman Pressly Thank you. Special Bd. of Aldermen – 09/21/11 Page 8 James M. McNamee, Esq. Just to put a point on the pencil, I was advised today that any sale of Southwood property required the specific approval of the board of directors of Pennichuck Corporation. Alderman Pressly Thank you. Alderman Chasse I believe your intentions are to go into non-public session? President McCarthy Yes. Alderman Chasse Are you able to state the reason? President McCarthy I believe it will be in the motion that is made by Alderman Clemons. Alderman Chasse Could he read the motion again please? President McCarthy We haven’t made the motion yet. Alderman Chasse Oh you haven’t made it yet. President McCarthy No. Alderman Chasse I will wait for the motion. President McCarthy We were finishing up, if there are questions that are appropriate for public session. Alderman Deane I had a question to Attorney Ardinger pertaining to the municipal bonds. Have you heard any of what is going on in Washington pertaining to the municipal bonds and this new stimulus junior bill that Special Bd. of Aldermen – 09/21/11 Page 9 they are looking to pass and pay back over a period of time? Did you see any of the particulars in there? Bill Ardinger, Esq. That is not directly related to this deal, but I could answer that. Alderman Deane So it has no net effect on our financing? Bill Ardinger, Esq. If it were to become law, it will have a long term effect on…the projection, the ways the analysts are reading it, is it would have an impact on municipalities’ abilities to issue bonds at lower interest rate costs. But right now that provision has a long way to go before it would ever become law. Washington is not quickly passing any legislation right now on any front with the budget or tax. Alderman Deane But that interest rate was what up front on the bonds and then they turned around and gave that money back to the municipalities to create jobs or whatever the purpose of it was? Bill Ardinger, Esq. There are two separate parts of the President’s jobs plan; one part is to try and appropriate additional dollars some of which are devoted to get to municipalities to help them build out infrastructure and other needs. That is the spending part, but then there is a tax part of the bill. Among other changes, one of them would be for folks with incomes above a certain level various tax benefits would not be available any longer. One of those is the ability to not pay income tax on interest paid on municipal bonds. That market for municipal bonds is completely dependent on that tax exemption. That one, but it is so early in the process. Alderman Deane that I have a feeling that the normal process that all legislative bodies go through will vet that and try and see whether the proposal makes sense or not, but it is a long road. Alderman Deane Thank you. President McCarthy That would basically have the effect of making municipal bond rates the same as commercial bond rates would it not? Bill Ardinger, Esq. Yes, in the long run. President McCarthy Are there any other questions before we go into non-public session? Special Bd. of Aldermen – 09/21/11 Page 10 NON-PUBLIC SESSION MOTION BY ALDERMAN CLEMONS THAT THE BOARD OF ALDERMEN GO INTO NON- PUBLIC SESSION BY ROLL CALL PURSUANT TO RSA 91-A:3,II(e) TO CONSIDER A PENDING CLAIM OR LITIGATION WHICH HAS BEEN THREATENED IN WRITING OR FILED AGAINST THE CITY SECONDED BY ALDERMAN LAROSE A Viva Voce Roll Call was taken, which resulted as follows: Yea: Alderman Clemons, Alderman Craffey, Alderman Deane, Alderman Pressly, Alderman LaRose, Alderman Melizzi-Golja, Alderman Cox, Alderman Sheehan, Alderman Chasse, Alderman Cookson, Alderman McCarthy 11 Nay: 0 MOTION CARRIED The Board of Aldermen went into non-public session at 8:23 p.m. The Board of Aldermen sealed the minutes of the non-public session and returned to the regular meeting of the Board of Aldermen at 9:33 p.m. ADJOURNMENT MOTION BY ALDERMAN LAROSE THAT THE SEPTEMBER 21, 2011, SPECIAL MEETING OF THE BOARD OF ALDERMEN BE ADJOURNED MOTION CARRIED The meeting was declared adjourned at 9:33 p.m. Attest: Patricia Piecuch, Deputy City Clerk